Skechers U.S.A. Recovers From Missteps

Footwear sales are growing steadily, and big players like Nike (NKE) and Timberland (TBL) are flourishing. One exception is Skechers U.S.A. (SKX), which sells more than 3,000 styles of lifestyle footwear. The stock has badly skidded this year, falling nearly 20 percent compared to Timberland’s 74 percent gain.

So what happened? Skechers was overly dependent on its poorly selling “toning” shoes, a market it created. Recently, the company was forced to clear out 2 million pairs of its toning shoes, marketed as Shape-Ups, at a loss of $21 million. “Last year we were the leaders in an explosive new category of footwear,” said Robert Greenberg, CEO of Skechers.

Skechers second quarter results disappointed analysts already bracing for losses. Sales dipped 14 percent to $434.4 million versus $504.9 million a year ago. The company’s net loss was $29.9 million, or 62 cents per share.

There is hope, though. Skechers has an updated lifestyle collection for adults, new kids’ lines, and an expanded offering of running and toning shoes for adults, note S&P analysts. “Initial sell-throughs have been strong,” says Greenberg. International sales grew by double digits, he added. Skechers is also rumored to be a takeover target.

New lines, new value

Analysts haven’t been won over. Of the four followed by Thomson/First Call, none have buy recommendations on Skechers. Three have holds, with one sell.

S&P recently raised its recommendation to hold from sell, citing Skechers’ new lines and emphasis on value and quality. However, poor new product sales and high-than-expected expenses could drag down results, analysts note. The company reports next in late October.

Footwear sales are growing steadily, and big players like Nike (NKE) and Timberland (TBL) are flourishing. One exception is Skechers U.S.A. (SKX), which sells more than 3,000 styles of lifestyle footwear. The stock has badly skidded this year, falling nearly 20 percent...